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Strategic management: The case of the Tesco plc

Table of Contents
Task 1: Provide a critical assessment of their statements of strategic intent,
namely the vision and mission with a view to propose justified change:.............3
Strategic change:.......................................................................................................... 3
Task 2: Assess the impact and relevance of environmental and competitive drivers
on the company:......................................................................................................... 5
The PESTEL analysis:................................................................................................... 5
Porters five forces analysis:............................................................................................ 7
The industry life cycle analysis:........................................................................................ 9
Task 3: Assess the relevance of the organizations existing culture, assets and
competencies for sustainable market relevance:.....................................................10
SWOT analysis:......................................................................................................... 10
Strategic capabilities analysis:........................................................................................ 12
VRIN analysis of Tesco:............................................................................................... 13
BCG Matrix analysis of Tesco plc:..................................................................................14
Task 4: Challenge the status quo as a basis for proposing change in strategic
direction over the next three years so that shareholder value ambitions may be met.
Explain the resource implications arising from your proposals:................................16
The Ansoff matrix analysis for the Tesco plc:.....................................................................16
Porters generic strategic analysis of Tesco plc:...................................................................18
Bowmans strategic clock analysis of Tesco plc:..................................................................19

Task 1: Provide a critical assessment of their statements of strategic


intent, namely the vision and mission with a view to propose justified
change:

The success of the Tesco plc can be attributed to its core competencies dedication to quality and
ethics and devotion to the essence and spirit of continuous improvement. As such, the decisions
and policies that make the organization one of the leading of the world can be related to the
strategic intent and mission and vision of the organization and the alignment of the same with the
tasks and activities of the organization (Ansoff, 2009).
However, the Tesco plc is embedded in such a sector where intense cut-throat is the rule of the
day and the survival of the fittest is the common law. As such, the management of the
organizations needs to constantly and consistently evolve adapt, adjust and improvise the policies
and strategies so as to maintain the shine of the business and maintain the dominating position
over the rivals by delivering added value for money to the customers, always and every time.
The mission, vision and strategic intent of the Tesco plc can be related to it being in line with its
strategies of international expansion and product diversification. Through effective and efficient
customer relationship management and in line with its policies of every bit matters the Tesco
plc seeks to maintain, strengthen and further expand its base of loyal customers and though
emphasis on quality and delivery of added value for money , the Tesco plc seeks to dominate the
domestic market of the UK, make a prominent footprint on the foreign marketing destinations
and also seek to further expand its market bases coupled with product differentiation strategies
and policies to attract new customers towards the brand. For the same, the Tesco plc has sought
to devise strategies and polices related to the product development, product positioning and
product diversification allied with marketing strategies and marketing research to segment and
target the segments of customers towards the brand (Baker, 2001).
Strategic change:
However, in the wake of the intensified competition and the entry of the Chinese retailers and
cheaper substitutes and alternatives, on one hand and the gaining of strength of the global leaders
like Wal-Mart and competitors like Sainsbury and Asda, on the other hand, have made the
situation more challenging and competitive for the Tesco plc and has urged its management to
assess and implement changes and improvements wherever necessary in terms of the strategy
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making on the part of the company to make it fit with the situation in hand. The strategic fit
analysis provides serves to be of great help in this regard so far the analysis of the macro and
micro environment of the organization is concerned (Burman, 2008). By virtue of the core
competencies and resources of the company allied with the brand image and solid track record,
the Tesco plcs domination and esteemed status as one of the leading retailers of the world would
not be subjected to imminent threat in the near future. However, it would be sensible and
justified to mention in the same breath that the strategies and policies of the organization
pertaining to innovation, marketing research, product differentiation and positioning strategies
and entry into new emerging markets have to be accurate and effective on a consistent and
continuous basis (Browne, 2004).
The changes that need to be incorporated into the mission and vision of the Tesco plc which
currently reads as to create value for the customers to earn their lifetime loyalty and the vision
of the Tesco plc can be related to being a successful international retailer and to diversify the
product lines to dominate the sectors of the food and non-food markets and to devise strategies
to deliver added value to the different segments of the customers (Cant, 2006). The changes in
the approach towards the strategic intent of the organization need to be incorporated into the
aspects of innovation, incorporation of modern technology in the better management of external
and internal, macro and micro environment dynamics of the organization and, product
diversification and positioning policies and decisions and identification and targeting of market
segments in the different overseas business destinations where the organization has recently
expanded into and seeks to expand in the near future. The strategic intent to deliver value to the
customers and retain the loyal customers need to be complemented by better customer
relationship management and customer satisfaction strategies and policies and the organization
need to improve vastly in the communication process related to use of the internet in better
customer relationship management (Cravens, et al., 2007).
In line with the concept of the Exploring Strategy model, the core capabilities, the tangible and
intangible resources available at the disposal of the organization, the assessment of the dynamics
of the internal and external market environment and the to assess the strategic position, the
strategic choices and strategy in action, the mission, vision statements and the strategic intent of
the Tesco plc have been analyzed and examined in the course of this section. The strategic
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choices, strategic position and strategy in action of the Tesco plc have been in line with its
business goals and management and leadership style and have attributed the current dominating
status to the organization (David, 2003).
The incorporation of streamlined policies and strategies towards better e-commerce or dotcom
business, as it is commonly known, would also serve to be a potent area where the strategies
need to lay more stress.

Task 2: Assess the impact and relevance of environmental and


competitive drivers on the company:

For sustained success and growth of any organization the factors of the dynamics of the external
organization and the role and activities of the rivals have profound influence. In the case of the
Tesco plc, the assessment of the dynamics of the external environment and the roles and
activities of the rivals act as crucial factors that influence the competitiveness of the Tesco plc in
the intensely competitive retail sector of the UK and in the international markets as well. For the
effective and efficient assessment and examination of the dynamics of the external environment
where the Tesco plc operates, the methods of PESTEL analysis and Porters Five Forces analysis
would be of great help to understand the present status of the organization and to decide upon the
future policies and strategies aimed at the improvement of the same for the organization (David,
2003).
The PESTEL analysis of the Tesco plc is illustrated below:
The PESTEL analysis:
Political factors:
The political factors can be related to the political system and the rules, regulations, laws and
regulations under the law of the land and the business organizations need to adjust and adapt
their policies and strategies according to the political factors in order to ensure smooth and hassle
free functioning of business. The policies and strategies of the Tesco plc, as such, have to be in
sync with the political factors in each of the business destinations its has expanded the market
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and business operations into and have to change and evolve with the passage of time and in
correspondence to the requirements (David, 2005).
Environmental factors:
Owing to the awareness about the clauses of environmental protection and environmental safety
and sustainability the incorporation of patterns and practices to ensure environmental safety and
sustainable business practices, the business organizations of the modern day have stressed more
on the activities and practices of business that need to comply with the national and international
regulations and requirements related to environmental protection and sustainability to avoid the
penalties and fines. The factor of environmental responsibility and accountability is also crucial
for the maintenance and improvement of the brand image and perception of the community and
the Tesco plc has to devise and implement strategies to ensure that the business activities and
practices meet the required standards and requirements of the national and international
rulebooks (David, 2005).
Social factors:
The social actors can be related to the aspects of corporate social responsibility and maintenance
of a proper brand image among the people of the local business destination and the larger
community, as well. The social aspects can be related to responsible and accountable business
practices on the part of the company and approach of the brand that communicate and actively
engage the components of the society in various programs and activities of the brand so as to
make the people aware and friendly with the brand and to improve the brand image in their eyes.
Hence, for the Tesco plc as well, the social factors and the particularities of the societal aspects
of each of the business destinations would be crucial for its sustained success and growth.
Technological factors:
The technological factors are also important in the sense that it reflects upon the latest
developments and advancements in the field of technology and the extent to which the business
organization have been able to incorporate in the internal and external activities of the
organization and on the other hand, the extent to which the business destinations have access to
the modern technological infrastructure that would help the organization manage and streamline
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the activities of the business properly. Hence, the factor of technological infrastructure, on one
hand and the incorporation of the latest available technology also serve as potent factors that can
influence the success of the Tesco plc in a given business scenario (Davis, 2001).
Economic factors:
The health of the economy, the aspects related to taxes, tariffs, trade barriers, duties and the like
the important factors that influence the working of international business organization and the
business organizations are expected to frame and implement their policies and strategies
according to these particularities in order to sustain in a given economic scenario and also to be
flexible enough to adapt and improvise its policies and strategies that evolve and change with
time and from situation to situation.
Legal:
The legal factors can be related to the employment policies of the national government, rules and
regulations governing the conduct of the business organization, the labor rights, rules and
regulations governing the hours of work and wage policies are important factors that influence
the conduct of business for the business organizations and considerably influence their internal
polices and decision making processes (Dess and Miller, 2003).

Source: (Switch Digital, 2015)

Porters five forces analysis:


The Porters five forces analysis serves to be another important and effective tool to analyze and
assess the strategic intent and status of a business organization.
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The Porters five forces analysis for the Tesco plc is illustrated as below:
Threat of substitutes:
The analysis against this variable hints at the fact that there exists a potent threat to the Tesco plc
in terms of the substitutes for the non-food items and this can be safely owed to the economic
stagnation, decrease in the amount of disposable income in the hands of the customers, decrease
in their purchasing capabilities and also the entry of substitutes and alternatives offering product
at cheaper rates and on discounts. However, the threat for the food products is low (Gilligan, et
al., 2003).
Threat of new entrants:
The threat in this case is low owing to the fact that the potent players in the market have a
prominent foothold on the retail market and there is less chance for new entrants to take away the
market domination from such potent players and hence, this threat is considerably low.
Competition from rivals:
The retails sector of the UK is one that has been marked with intense competition for a
considerable span of time and with the changes in the market conditions and ever changing and
ever evolving customer behavior, the competition posed by the rivals is expected to grow even
more intense in the upcoming days (Hawes, 2002).
Bargaining power of the buyers:
Owed to the stiff competition posed by the rivals, the entry of new players and the availability of
substitutes and alternatives in the market, the bargaining power of the customers has become
powerful and the customers hold center stage in the arm-twisting the policies and pricing of the
products by the business organizations of the retail sector like the Tesco plc.
Bargaining power of the suppliers:
The bargaining power of the suppliers is fairly low in the retail sector of the UK. The dominant
players of the retail sector of the UK like the ASDA and the Sainsbury play a dominating rule not
only in the market over the competitors but also over the suppliers and through effective and
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efficient management and engagement strategies are able to negotiate terms in their favor. Hence,
this threat is low foe the Tesco plc (Hitt, et al., 2009).

Source: (Schmidke330.wikidot.com, 2015)


The industry life cycle analysis:
The industry life cycle analysis of Tesco deals with the stages of the introduction, growth,
maturity and ultimately decline, measured against the variables of time and industry output.
From this analysis, it can be stated that the having experienced accelerated growth over the years
the Tesco plc is in a stage of stabilization and with the passage of time, but not in the foreseeable
future, would face the decline phase with the declining growth and the shift of demand to other
rival brands, alternative and substitute products (Jeffs, 2008).

Source: (Boveri, 2012)

Task 3: Assess the relevance of the organizations existing


culture, assets and competencies for sustainable market
relevance:

For the assessment of the organizational culture, assets and competencies the application of the
conceptual and analytical tools of SWOT analysis, VRIN analysis, strategic capabilities and
BCG matrix would be important. The SWOT analysis of the Tesco plc would look like the
following:
SWOT analysis:
Strengths:
Solid foundation of loyal customer base in the UK and a positive brand image in the various
business destinations
Superiority in terms of technology, innovation, resources and core competencies attributing the
competitive edge over the rivals
Successful results in market expansion and product diversification
Weaknesses:

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Lack of experience in emerging markets marked with cultural and social differences and
particularities
Calling back of products and the bad name resulting from it
Weaknesses in geographic diversification with over-emphasis on the UK domestic market
Opportunities:
Good performance record in new market destinations
Innovation and incorporation of modern technology in the organizational processes and better
results emanating from the same
Product diversification and expansion into new markets destinations also proc=vide bright
opportunities for business to the Tesco plc (Jeyarathnam, 2008).
Threats:
Upward shift in the prices of the raw materials
The entry of cheaper alternatives and substitutes
Intense competition
Ever changing nature of customer behavior and demands
Economic stagnation of the major economies of the world

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Source: (Parkhurst Consulting CPA PC, 2014)

Strategic capabilities analysis:


The strategic capabilities of the Tesco plc can be related to its core competencies, brand image,
string foothold over the domestic market and the overseas markets as well and the efficiency and
effectiveness of the employees and the managers. The tangible and intangible resources of the
company also attribute the strategic capabilities to the Tesco plc and help it maintain and further
improve upon the factors that enable it to develop and strengthen the competitive advantage over
the rivals in the market (Jeffs, 2008).
The physical, financial, human and intellectual resource available at the disposal of the Tesco plc
make up the core of the strategic analysis of the organization and the resources categorized as the
threshold resources, threshold competencies, unique resources and core competencies make up
the base for the strategic capability of the Tesco plc.

The resources in the form of the

infrastructural facilities, technological capital, human resources and he bran image are the main
competencies of the Tesco plc and these competencies would enable the organization to maintain
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its esteemed position in the retail market in the UK as well as on the international platform for a
considerable period of time. Such resources are the ones that cannot be imitated by other and
have been the result of the experience and successful achievements of the organization in terms
of customer satisfaction and responsible and ethical business practices and have been built upon
the sweat of the managers and the employee, the foundation on which the present status of the
organization is built (Jeyarathnam, 2008).

Source: (Mercuriurval.com, 2015)


VRIN analysis of Tesco:
The VRIN analysis would enable identify and reflect upon the aspects that may attribute the
competitive edge to the organization and also enable deliver added value to the customers.
The VRIN analysis deals with the examination and analysis of the components of the value chain
of the organization and help decide upon the aspects related to improvements that may be made
in the context of the products or the costs associated with them so as to deliver added value to the
customers. The primary aim of this analysis rests on the premise of being able to satisfy the
customers in the most cost-effective manner so as to maximize the profits (Kotler, 2000).
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The value chain analysis of the Tesco pc deals with the aspects involving the major activities that
help add value to the products aligned with their support mechanisms and activities. The main
competitive advantages of the Tesco plc can be related to the inbound logistics, operations,
outbound logistics, marketing and sales and customer services (Karunakaran, 2008). As such,
the Tesco plc, by virtue of its economies of scope and its dominant position in the retail market
dominates the scene by arm-twisting the policies of and negotiations with suppliers to ensure that
the products are produced at permissible costs and the firm is able to rip off the advantages of
added value to the products at reasonable internal costs. Moreover, the outbound logistics related
aspects of Tesco Clubcard and the liker attribute superiority to the firm in terms of customer
loyalty programs and retention of loyal customers and can be cited as one of the major forces
behind its success (Phelps and Westing, 2008).

Source: (Netsains.net, 2015)


BCG Matrix analysis of Tesco plc:
Stars:
The UK market serves to be the star for the Tesco plc. With high market shares and high rates of
growth, the UK retail sector serves to be the perfect platform for the company so far its

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domination in retail; sector is concerned and also in terms of its diversification into other fields
like petrol banking and financial services, telecommunications et cetera.
Question marks:
The emerging markets of Asia and South America swerve to be the question marks for the Tesco
plc marked with high growth rates but less developed market shares. These markets reflect
immense potential for further market foothold through better strategies and policies (Phelps and
Westing, 2008).
Cash cows:
These conditions are marked with large market shares but low levels of market growth and the
European market of the Tesco plc can be cited as being a cash cow for the Tesco plc.
Dogs:
The dogs signify those market sectors that attribute low levels of market growth and low share of
market and attribute negative profit making trends. The banking sector of the USA, for the Tesco
plc serves to be bright example of Dogs for the organization (Sadler, 2003).

Source: (Netmba.com, 2015)

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Task 4: Challenge the status quo as a basis for proposing


change in strategic direction over the next three years so that
shareholder value ambitions may be met. Explain the resource
implications arising from your proposals:

The Ansoff matrix analysis for the Tesco plc:


Market penetration:
For the existing market, the Tesco plc would need to increase the share of its products in
comparison to Sainsbury and Asda and seek to attract new customers towards the brand while
retaining the existing ones.
Product development:
For the new markets, the Tesco plc can diversify the product lines and expand into the new
markets or offer the standard products to the new markets to have a successful head start to the
penetration into the new markets
Market development:
In terms of the market development, the Tesco plc can adjust and frame policies and strategies to
move into the convenience store market and also seek to expand the business to offshore
destinations abroad (Saloner, et al., 2001).
Product diversification:
For the product development, the Tesco plc can develop and diversify products by expanding
into the petrol sales and the development of various financial services for customers and clients
The penetration of markets that are already existing, means that the products needs to be sold to
the same base of customers and to be successful, the company has to take away customers from
the rivals. In a stagnant market, the opportunities for success are low as the risks till the growth
of the market rejuvenates to gain new momentum (Sheehan, 2011).
The market development can be related to selling the standard products to the existing customers
or penetrating new markets with new customers offering the same products or penetrating into
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new markets with new products on offer or penetrating into new overseas market destinations
and for the same, the changes and advancements in the pricing strategies, the marketing
strategies and supply and distribution channels also need to be changed and made appropriate
with the particularities of each of the overseas business destinations.
The product development can be related to the aspects of innovation and creation of new
products or replacement of old products by new ones or extension of the product lines,
complementary new products for the existing ones and maneuvering with the quality of the
existing products for different target segments (Williams, 2009).
Though the endeavor to produce new products can be a costly and risk affair, firms such as the
Tesco plc, with considerable strengths in research and development facilities, string foothold
over the market, superior change management and solid foundation of resources can find this
strategy appropriate.
The product diversification an prove to be a risks endeavor for the Tesco Plc as it involves
experimenting with the two unknowns of product and market environment and as such, such
decision must rely on masterful marketing research and intelligence gathering at the time of
decision making on the part of the management of the Tesco plc (Winer, 2004).

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Source: (Tutor2u.net, 2015)

Porters generic strategic analysis of Tesco plc:

Porter advocated three areas of emphasis for business organizations to lay stress on in order to
develop or maintain the competitive edge over the rivals in the market.
In line with the concept, the strategy of cost leadership can be implemented by the Tesco plc to
gain and maintain and further strengthen the competitive edge over the rivals by producing goods
and services at lower internal costs by virtue of acquiring raw materials at permissible prices and
through the incorporation of modern state of the art technology to manage the internal processes
and activities to maximize the profit margins and without compromising with the quality of the
products (Winer, 2004).
The next strategy deals with the product differentiation strategies that opine that business
organizations must concentrate on product differentiation to portray its unique image in the
market and take in its stride the crucial first impression of the customers. The primary aim of this
strategy is also to deliver added value to the customers by offering unique or never seen before
products to the customers and thus, carving a niche of their own. The factors of special features,
different appearance, technological superiority and streamlined customer service management
strategies complement such strategies (Sheehan, 2011).
The third strategy deals with the adoption of a market oriented or segment focused approach to
target specific customers through the products and services and cost leadership and product
diversification complements this strategy. The Tesco plc can implement such strategies related to
cost leadership, product differentiation and focusing on a specific market segment to maintain
and further strengthen its competitive advantage over the competitors in the intensely
competitive market (Saloner, et al., 2001).

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Source: (Winer, 2004)


Bowmans strategic clock analysis of Tesco plc:

The Bowmans strategic clock analysis also deals with the ways a firm can maintain the
competitive advantage by identifying the key competitors and devise and implement policies and
strategies to develop the edge over such rivals through different techniques and strategic choices
like lower prices, hybrid or reinvestment cycle and products differentiation. The success in the
international market, product diversification and differentiation, focused differentiation,
streamlined supplier management, superior customer relationship management strategeis and a
string base of loyal customers serve to be the driving wheel behind the success of the Tesco plc
(Winer, 2004).

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Source: (Mindtools.com, 2015)

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